How Did Markets React To Stress Tests
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How Did Markets React To Stress Tests
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Author : Bertrand Candelon
language : en
Publisher: International Monetary Fund
Release Date : 2015-04-01
How Did Markets React To Stress Tests written by Bertrand Candelon and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-04-01 with Business & Economics categories.
We use event study methods to compare the market reaction to U.S. and EU-wide stress tests performed from 2009 to 2013. Typically, stress tests have a positive impact on stressed banks’ returns. While the 2009 U.S. stress test had a large positive outcome, the impact of subsequent U.S. exercises decreased over time. The 2011 EU exercise is the only EU-wide stress test that resulted in a significant negative market reaction. Comparing past exercises suggests that the qualitative aspects of the governance of stress tests can matter more for stock market participants than technical elements, such as the level of the minimum capital adequacy threshold or the extent of data disclosure.
How Did Markets React To Stress Tests
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Author : Bertrand Candelon
language : en
Publisher:
Release Date : 2015
How Did Markets React To Stress Tests written by Bertrand Candelon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Crisis management categories.
We use event study methods to compare the market reaction to U.S. and EU-wide stress tests performed from 2009 to 2013. Typically, stress tests have a positive impact on stressed banks' returns. While the 2009 U.S. stress test had a large positive outcome, the impact of subsequent U.S. exercises decreased over time. The 2011 EU exercise is the only EU-wide stress test that resulted in a significant negative market reaction. Comparing past exercises suggests that the qualitative aspects of the governance of stress tests can matter more for stock market participants than technical elements, such as the level of the minimum capital adequacy threshold or the extent of data disclosure. --Abstract.
March Madness In Wall Street
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Author : Marcelo Fernandes
language : en
Publisher: International Monetary Fund
Release Date : 2015-12-23
March Madness In Wall Street written by Marcelo Fernandes and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-12-23 with Business & Economics categories.
Annual stress tests have become a regular part of the supervisors’ toolkit following the global financial crisis. We investigate their capital market implications in the United States by looking at price and trade reactions, information asymmetry and uncertainty indicators, and bank activities. The evidence we present supports the notion that there is important new information in stress tests, especially at times of financial distress. Moreover, public disclosure seems to help reduce informational asymmetries. Importantly, public disclosure of stress test results (and methodology) does not seem to have reduced private incentives to generate information or to have led to distorted incentives.
Macrofinancial Stress Testing Principles And Practices
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Author : International Monetary Fund. Monetary and Capital Markets Department
language : en
Publisher: International Monetary Fund
Release Date : 2012-08-22
Macrofinancial Stress Testing Principles And Practices written by International Monetary Fund. Monetary and Capital Markets Department and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-08-22 with Business & Economics categories.
The recent financial crisis drew unprecedented attention to the stress testing of financial institutions. On one hand, stress tests were criticized for having missed many of the vulnerabilities that led to the crisis. On the other, after the onset of the crisis, they were given a new role as crisis management tools to guide bank recapitalization and help restore confidence. This spurred an intense debate on the models, underlying assumptions, and uses of stress tests. Current stress testing practices, however, are not based on a systematic and comprehensive set of principles but have emerged from trial-and-error and often reflect constraints in human, technical, and data capabilities.
Stress Testing At The Imf
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Author : Mr.Tobias Adrian
language : en
Publisher: International Monetary Fund
Release Date : 2020-02-05
Stress Testing At The Imf written by Mr.Tobias Adrian and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-02-05 with Business & Economics categories.
This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.
Should Banks Stress Test Results Be Disclosed An Analysis Of The Costs And Benefits
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Author : Itay Goldstein
language : en
Publisher:
Release Date : 2016
Should Banks Stress Test Results Be Disclosed An Analysis Of The Costs And Benefits written by Itay Goldstein and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Stress tests have become an important component of the supervisory toolkit. However, the extent of disclosure of stress-test results remains controversial. We argue that while stress tests uncover unique information to outsiders - because banks operate in second-best environments with multiple imperfections - there are potential endogenous costs associated with such disclosure.First, disclosure might interfere with the operation of the interbank market and the risk sharing provided in this market. Second, while disclosure might improve price efficiency and hence market discipline, it might also induce sub-optimal behavior in banks. Third, disclosure might induce ex post market externalities that lead to excessive and inefficient reaction to public news. Fourth, disclosure might also reduce traders incentives to gather information, which reduces market discipline because it hampers the ability of supervisors to learn from market data for their regulatory actions.Overall, we believe that disclosure of stress-test results is beneficial because it promotes financial stability. However, in promoting financial stability, such disclosures may exacerbate bank-specific inefficiencies. We provide some guidance on how such inefficiencies could be minimized.
Banking S Final Exam
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Author : Morris Goldstein
language : en
Publisher: Columbia University Press
Release Date : 2017-05-30
Banking S Final Exam written by Morris Goldstein and has been published by Columbia University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-05-30 with Business & Economics categories.
Spurred by the success of the first stress test of US banks toward the end of the global economic crisis in 2009, stress testing of large financial institutions has become the cornerstone of banking supervision worldwide. The aim of the tests is to determine which banks are adequately capitalized under severe economic shocks and to order corrective measures for those that are vulnerable. In Banking’s Final Exam, one of the world’s leading experts on banking regulation concludes that the tests administered on both sides of the Atlantic suffer from fundamental weaknesses, leading to a false sense of reassurance about the safety and soundness of the banking system. Some weaknesses can be corrected within the existing bank-capital regime, but others will require bold reforms—including higher minimum capital requirements for the largest and most systemically-important banks. The banking industry is likely to resist these reforms, but this book explains why their objections do not hold water.
United States
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Author : International Monetary Fund. Monetary and Capital Markets Department
language : en
Publisher: International Monetary Fund
Release Date : 2015-07-07
United States written by International Monetary Fund. Monetary and Capital Markets Department and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-07-07 with Business & Economics categories.
This Technical Note discusses key findings of stress testing on the United States under the Financial Sector Assessment Program. Several stress tests were used to quantify the potential impacts of risks and vulnerabilities in banking and non-banking sectors. The stress tests run by the authorities and by companies under the Dodd-Frank Act (DFA) suggest that most large bank holding companies (BHCs) are resilient to shocks similar to the last crisis. For BHCs, the IMF staff’s solvency stress tests over the initial stressed period are largely in line with the DFA stress testing results, and suggest that the system is generally robust, although some BHCs would fall below the hurdle rate in the stressed environment.
How Did Markets React To Stress Tests
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Author : Bertrand Candelon
language : en
Publisher: International Monetary Fund
Release Date : 2015-04-01
How Did Markets React To Stress Tests written by Bertrand Candelon and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-04-01 with Business & Economics categories.
We use event study methods to compare the market reaction to U.S. and EU-wide stress tests performed from 2009 to 2013. Typically, stress tests have a positive impact on stressed banks’ returns. While the 2009 U.S. stress test had a large positive outcome, the impact of subsequent U.S. exercises decreased over time. The 2011 EU exercise is the only EU-wide stress test that resulted in a significant negative market reaction. Comparing past exercises suggests that the qualitative aspects of the governance of stress tests can matter more for stock market participants than technical elements, such as the level of the minimum capital adequacy threshold or the extent of data disclosure.
Credibility And Crisis Stress Testing
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Author : Ms.Li L. Ong
language : en
Publisher: International Monetary Fund
Release Date : 2013-08-09
Credibility And Crisis Stress Testing written by Ms.Li L. Ong and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-08-09 with Business & Economics categories.
Credibility is the bedrock of any crisis stress test. The use of stress tests to manage systemic risk was introduced by the U.S. authorities in 2009 in the form of the Supervisory Capital Assessment Program. Since then, supervisory authorities in other jurisdictions have also conducted similar exercises. In some of those cases, the design and implementation of certainelements of the framework have been criticized for their lack of credibility. This paper proposes a set of guidelines for constructing an effective crisis stress test. It combines financial markets impact studies of previous exercises with relevant case study information gleaned from those experiences to identify the key elements and to formulate their appropriate design. Pertinent concepts, issues and nuances particular to crisis stress testing are also discussed. The findings may be useful for country authorities seeking to include stress tests in their crisis management arsenal, as well as for the design of crisis programs.